Editorial: Time for another green revolution
Interactive graphic: Consumer perception vs environmental realities
Back to landing page: Hey, green spender: The truth about eco-friendly brands
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IF YOU care about the environment, you may want to show that in the way you spend your money. Maybe you shop at an organic food store rather than a conventional supermarket. You probably look at energy efficiency labels before buying a new laptop. And if youāre really serious, you may even be concentrating your nest egg into āgreenā investment funds.
All of these decisions could help steer us towards a truly green economy ā but only if consumers and investors have a good idea of which companies have genuinely minimised their impact on the environment. Do the corporations that benefit from our environmentally conscious purchasing and investment choices deserve their green halo?
To find out, Ā鶹“«Ć½ teamed up with two companies that have collected the most relevant data. Earthsense, based in Syracuse, New York, has polled US consumers on their perceptions of the āgreennessā of various companies. Trucost, headquartered in London, has compiled an unparalleled quantitative assessment of companiesā global environmental impact (see interactive graphic, and āHow we crunched the numbersā).
Bringing these two sets of information together shows just how confused ordinary people are about companiesā green credentials. Overall, there was no correlation between the Earthsense and Trucost scores, suggesting that US consumers have little idea about companiesā environmental performance relative to each other. And looking within industrial sectors, the only hint of accurate consumer awareness came for technology companies (see āGeeks, gadgets and the environmentā).
āThe figures show just how confused people are about firmsā green credentialsā
In some cases there were dramatic mismatches between perceptions and reality. Take media firm Discovery Communications: its environmental impact, per dollar earned, is almost indistinguishable from TV and movie giant Viacom. Yet Discovery has a stellar green reputation that Viacom does not enjoy ā which could be due to Discoveryās content, which includes Animal Planet TV and websites such as TreeHugger.
Some of the greatest confusion surrounds the food and beverage sector. Of the 115 firms we analysed, producers of food and drinks stood out as having the highest environmental impact ā significantly different from media firms, retailers, technology companies and manufacturers of personal and household goods. Yet there were no significant differences in consumer perceptions between the sectors. In general, US consumers fail to recognise the high environmental costs associated with agriculture and food processing.
When it comes to perception, one companyās high score truly stands out: Whole Foods Market, which operates more than 270 stores, mostly in the US. As a purveyor of ānatural and organic produceā, everything about Whole Foods shouts green. In addition to its overall branding, the company has taken steps to reinforce its environmental credentials, including improving the efficiency of its refrigerators and reducing packaging. But Trucostās modelling rates Whole Foods no better than conventional supermarkets such as Safeway.
That doesnāt mean Whole Foods isnāt doing what it says it is. Rather, the company has not disclosed all its key environmental data, forcing Trucost to model its impact from an analysis of its overall operations ā including sourcing produce, distribution and running its stores ā which will be similar to other food retailers. āWe cannot update our data without disclosure from a company,ā says James Salo, Trucostās vice-president for strategy and research.
Kathy Loftus, a specialist in environmental management with Whole Foods, says that the company expects to produce a full inventory of its greenhouse gas emissions later this year. That might reduce the Trucost score a little ā although it will be hard to match the performance of retailers selling goods other than food, which donāt have to account for the high environmental costs of agriculture in their supply chains.
When looking at Whole Foodsā glowing reputation, executives at The Coca-Cola Company have every reason to be green with envy. The firm has the second-lowest environmental impact of all the food and drink producers in our sample, yet doesnāt seem to be getting much credit for its actions ā even after releasing the numbers.
Water stewardship
For Coca-Cola and its main rival, PepsiCo, the key issue is water. Soft-drinks manufacturers typically consume several times the volume that makes it into their products. Coca-Cola has reduced the amount lost during manufacturing, in part by rinsing bottles and cans with high-pressure air; it is also sourcing sugarcane from suppliers that use water more efficiently and even investing in the sustainable management of entire river basins.
PepsiCo is taking similar steps, but unlike Coca-Cola has not yet given detailed figures on its progress. So it emerges in an unflattering light, with roughly twice the environmental impact of Coca-Cola ā six times as high for water-use impacts alone.
Neither firm, however, is seen as a friend of the environment by US consumers. And Coca-Cola has experienced first-hand the hit a company can take if its environmental reputation becomes tarnished. After it built a bottling plant in Kerala, India, in 2000, Coca-Cola faced a barrage of criticism for allegedly depleting local groundwater. The company , but the plant was closed by local officials in 2004. Coca-Cola later won permission in court to restart operations, but it had already lost the battle for public acceptance, and the plant never reopened.
āIt was a teaching moment,ā says Lisa Manley, Coca-Colaās director of environmental communications. āWe have been very focused on water stewardship since then.ā So why havenāt consumers got the message? āOur approach is that we need to focus on doing before we focus on saying,ā Manley says.
Earthsense co-founder Amy Hebard believes many corporations could benefit from telling the public more about their actions to protect the environment. āThis just screams opportunities for companies to be clear about what they are doing,ā she says. Hebard suspects that some firms are worried that trumpeting their environmental successes will be seen as āgreenwashingā ā falsely giving the appearance of environmental concern. But our results for General Electric, among the most prominent firms to be accused of this corporate sin, suggest that green marketing can be an effective strategy.
In 2005, GE launched its multimillion-dollar āEcomaginationā campaign, highlighting activities in clean technology, renewable energy, and so on. While the company remains a significant polluter, Trucostās analysis indicates that its environmental footprint is indeed smaller than other industrial engineering firms, such as Kawasaki Heavy Industries and Siemens. By the time Earthsense ran its survey, in May 2008, GE seemed to be reaping the benefits of Ecomagination, scoring first for consumer perception within its sector ā and seventh overall.
While full disclosure of environmental data, backed by active green marketing, may benefit some companies, our analysis suggests that others have every reason to keep quiet. The contrast between Fresh Del Monte Produce and Green Mountain Coffee Roasters makes this clear. Both of these companies are seen by consumers as very environmentally friendly, yet they stand at opposite ends of the spectrum for environmental impact among our sample of food and beverage firms.
Words like āfreshā and āgreenā immediately suggest a wholesome image. This is central to the identity of Green Mountain, a producer of whole-bean and ground coffee, including organically grown varieties. It is, indeed, the greenest of all our food and beverage companies, according to Trucostās analysis.
āWords like āfreshā and āgreenā immediately suggest a wholesome imageā
Fresh Del Monte Produce similarly projects a green image, but Trucostās numbers paint a different picture. Growing fruit and vegetables involves heavy use of fertilisers and pesticides, but the main issue again is water consumption, which accounts for more than three-quarters of the companyās high environmental impact score.
Fresh Del Monte Produce doesnāt disclose detailed environmental data, and declined to comment on Trucostās modelling, or its own efforts to reduce its environmental footprint. āWe are doing things internally that we are not ready to talk about right now,ā says Dionysios Christou, the companyās vice-president for marketing.
Examples like this show why efforts to compel or encourage companies to release data on their environmental impacts will be crucial, if consumersā and investorsā āgreen dollarsā are to exert a meaningful influence.
Such efforts are gathering pace, driven by investor demand: the number of companies reporting their total greenhouse gas emissions to the Carbon Disclosure Project, which aims to inform investors on companiesā environmental impacts, jumped from 922 in 2006 to 2204 in 2008. āThere is a trend towards more corporate disclosure,ā says Cynthia Cummis of the World Resources Institute (WRI) in Washington DC.
The Carbon Disclosure Project is now working on a companion water initiative, and in January the US Securities and Exchange Commission told publicly traded companies that they should disclose whether existing or planned regulations relating to climate change could affect their earnings. āThe SEC announcement is a pretty big deal because it points the way towards mandatory disclosure,ā says Piet Klop, also with WRI.
Information for wannabe green consumers has so far lagged behind that for investors. āIt needs to be easy to understand, use and obtain ā and today thatās anything but the case,ā Hebard says. One project to watch is the online GoodGuide, launched by Dara OāRourke of the University of California, Berkeley. It includes an iPhone app that allows consumers to scan productsā bar codes to get an instant environmental rating.
Meanwhile, US retail giant Walmart has launched a āsustainability indexā, which by 2013 should give details of the total environmental costs associated with various products. The company also says it is likely to give greener products more shelf space, providing a direct incentive for Walmartās suppliers to clean up their acts.
For companies that are currently trading off green reputations that they donāt deserve, there may soon be no place to hide.
Interactive graphic: Consumer perception vs environmental realities
Editorial: Time for another green revolution
Back to landing page: Hey, green spender: The truth about eco-friendly brands
How we crunched the numbers
When we decided to investigate the relationship between corporate green performance and reputations, Earthsense and Trucost were the obvious partners.
Trucostās assessment accounts for more than 700 environmental impacts, including greenhouse gas emissions, water use and a host of chemical releases. Its models cover all of a companyās activities, incorporating actual figures when these are disclosed. It also works with firms to refine the results to ensure as accurate a profile of their impacts as possible.
Trucost then converts each impact into an annual cost. In the case of a firm running a fleet of diesel vehicles, for example, these costs could include the burden of treating people with lung disease caused by soot particles emitted, plus the price of greenhouse gas emissions in a carbon-trading market. Finally, Trucost divides the cost of all the impacts by the firmās annual revenue to produce an environmental impact ratio.
While there are many ways of assessing corporate environmental performance, Trucostās method is among the most comprehensive, and allows firms of different sizes, and operating in different sectors, to be compared. Importantly, its calculations reflect companiesā potential financial liability, if regulators were to get tough about applying the āpolluter paysā principle ā which is why major investors and many of the companies Trucost reports upon pay for access to its data.
We compared Trucost scores with results from a 2008 survey of US adults carried out by Earthsense. In our analysis, the Earthsense scores were derived from the answers to two questions: one on perception of each companyās overall operations and policies; the other about the environmental impact of its products.
Geeks, gadgets and the environment
If there is one area in which consumers seem to have some idea about what constitutes a green company, it is technology. This was the only industrial sector where there was a significant correlation between consumer perceptions and actual environmental impact.
This seems to be largely down to the fact that consumers understand that companies that simply write software and store data have an inherently smaller environmental impact than those that run factories making hardware.
A green company ā which has limited the overall environmental impact of its manufacturing and operations ā isnāt necessarily the same thing as one that sells green products. In December 2008, Dell took aim at Appleās boast to have made āthe worldās greenest family of notebooksā, questioning both the specific claim and Appleās wider record. Ratings by the Green Electronics Council, which evaluates products according to 51 environmental criteria, suggest that Appleās MacBooks are greener than Dellās rival products. Yet according to Trucost, Dell has a slightly smaller environmental impact across its entire operations.
Consumers, however, donāt always make the distinction. The Earthsense survey indicates that Apple was winning the battle for perception even before it made the āgreenest notebookā claim.
